Review terms of Sankofa project — NPP
The New Patriotic Party (NPP) has called for a review of some of the terms in the Sankofa project.
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The party said it was untenable for the Ghana government to grant “unprecedented incentives” to the Italian company that is executing the project and pointed out that considering the fact that the project agreement was binding for 20 years, Ghana was bound to suffer severely.
It, therefore, appealed to the Italian Prime Minister, Mr Matteo Renzi, who is in the country on a two-day visit, to compel the government of Ghana and ENI to review some aspects of the contract agreement.
While welcoming the Italian Premier to Ghana, the biggest opposition party said, “The NPP is constrained to highlight for the consideration of His Excellency and, indeed, all Ghanaians aspects of Ghana’s contractual relationship with ENI, a state-owned Italian oil conglomerate, and its partners over the exploitation of the Offshore Cape Three Points Block (OCTP).”
Worries
A statement signed by the NPP’s Director of Communications, Nana Akomea, outlined the reasons for the party’s position.
First, it mentioned the financial terms provided by the Ghana government as worrisome.
“The Government of Ghana’s provision of financial terms to ENI and its partners of 20 per cent return on investment, instead of the normal 12.5 per cent, is an unusually high rate for commercial transactions of this nature, especially as the GNPC assumes all the risks in the project,” it said.
It further expressed disgust at the negotiated price, saying “the negotiated gas price of $9.8/MMBtu for gas from the Sankofa fields is too high by world standards of between $5-7/MMBtu. It is even higher than the price of gas sold to Ghana from Nigeria, which stands at $8.3/MMBtu, delivered in Takoradi. It is even more expensive than our own Atuabo Gas price of $8.8/MMBtu delivered in Takoradi”.
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“At the negotiated gas price of $9.8/MMBtu, it puts to great risk Ghana’s potential of becoming the petrochemical hub of the region to Nigeria, due to that country’s lower gas prices,” it said.
Again, the statement said the agreement made it compulsory for the GNPC to buy up to 90 per cent of ENI-produced gas at a higher negotiated price of $9.8/MMBtu for 20 years, adding, “This gas sales agreement is further guaranteed against default by three guarantees – the government of Ghana, the World Bank and the GNPC – amounting to some $750 million.
“Furthermore, the GNPC, after buying the gas from ENI at a guaranteed price, stands the risk of losing its market (VRA, IPPs, petrochemical industries) to other cheap gas suppliers.
“Ghana also guarantees additional free cash flows to the company by allowing it to write-off seven per cent interest on all commercial loans from project revenues, when the normal provision is between two and three per cent. This also reduces Ghana’s potential tax revenue from this project by over $160 million. No other companies, whether from Jubilee or TEN, have been given this same rate of seven per cent.”
Cost too high
It stated that while the cost of the development of the Jubilee Fields, with more reserves of oil equivalence and with a water depth of 3,630 ft, came to $4 billion, that of the TEN oil fields, also with more reserves of oil equivalence, was $4.9 billion, “the cost of development of ENI’s Sankofa is $7 billion, with less reserves of oil equivalence and at relatively lower water depths of 2,706 ft. We wonder the quality of due diligence done, if any”.
Consequently, the party questioned the motives behind the government of Ghana’s decision “to bend backwards and grant all these unprecedented incentives, which are not even available to the original developers of Cape Three Points”.
“We are highlighting these issues, as this is potentially the largest single investment in Ghana, which will bind the Ghanaian people for the next 20 years. It is, therefore, important that the benefits of this project are not so one-sided as they seem today,” the statement added.